Assessment Two Individual Report

Running head: ASSESSMENT TWO – INDIVIDUAL REPORT 1

Assessment Two – Individual Report

Name:

Institution:

ASSESSMENT TWO – INDIVIDUAL REPORT 2

Contents

Executive Summary….…………………………………….............................................3

Introduction……………………………………………………..…………………….4-5

Competitive Position Strategy…………………………………………………….…..5-7

Resource-Based View…………………………………………………………………7-9

Current Strategic Directions and Development Methods……………………….…...9-12

Recommended Growth Directions and Development Methods……………….….. 12-14

Conclusions……………………………………………………………………………14

References…………………………………………………………………………..15-17

Appendices……………………………………………………………………….……18

ASSESSMENT TWO – INDIVIDUAL REPORT 3

Executive Summary

This paper was a continuation of Assessment One which conducted a general strategic

analysis of Hong Kong Airlines. It led to realizing that the company has strengths and

weakness caused by macro and micro factors. This research used theoretical frames such as

Porter’s Value Chain, Porter’s Generic Strategies, and more to build an understanding about

the current strategic and competitive position of Hong Kong Airlines. The company seemed

to be exploiting cost leadership for competition. Also, its main strategic directions are market

penetration, market development and diversification. The main recommendation to the

company is that it should utilize current effective ways of marketing.

ASSESSMENT TWO – INDIVIDUAL REPORT 4

Introduction

This research will be a continuation of Assessment One which strategically assessed

Hong Kong Airlines. It identified the company’s current position, trends, and prospects

through stating its mission and analyzing its strengths and weaknesses. Also, the paper also

determined the micro and macro factors which influence the organization’s operations and

performance. It was notable that the company gets affected by political, social, economic,

legal, environmental and technological factors, as well as, various underlying market forces

in Hong Kong such as bargaining power, competition and more. Some of these elements

seem to weaken the company but, it also gets strengthened by the fact that it has an extensive

airline network, an effective program for clients, beneficial alliances, a corporate logo, and

advanced IT systems. Assessment two concentrates solely on the companies’ strategic

direction. According to Madu (n.d.), determining direction means identifying the

organization’s destination and stating strategic changes that may be necessary for future

profitability. Therefore, this paper regards strategic direction to be what a company plans to

achieve as per its mission and vision, and what the company may consider doing to ensure

future growth and profitability. Strategy, as a general term, means, the set of activities a

company chooses to do, to attain a unique mix of values relating to competitive positioning,

differentiation, and even value addition (Madu, n.d.). That shows the real essence of strategic

direction is to ensure smooth running and growth. From Assessment One, it is evident that,

currently, the company has both strengths and weakness, and it faces both favorable and

unfavorable circumstantial factors pertaining market forces and more. It means that some

conditions create the need for the company to make necessary strategic adjustments and

precautions for future profitability and growth. This paper will perform an in-depth analysis

of Hong Kong Airlines’ strategic situation through reviewing the various discussed elements

about strategy and direction such as competitive position and more, and also recommend

ASSESSMENT TWO – INDIVIDUAL REPORT 5

specific strategic initiatives the company could consider for future growth. Hong Kong

Airlines seems to be thriving in the market remarkably given its many latest expansions and

partnerships; however, the company should ensure to exploit current advanced marketing

technologies for more brand awareness.

Competitive Position Strategy

According to Tanwar (2013), a strategy is about choosing a direction and ways to get

there. This part of the paper will determine Hong Kong Airlines’ competitive situation. Like

in the first assessment where approved and renowned methods of analysis such as PESTLE

and SWOT got used to determine the market factors, strengths, and weaknesses of the

company. This assessment will also utilize and rely on theoretical frameworks developed by

popular business researchers to create solid reasoning about the company’s current

competitive state in the market and more. The competitive position strategy concerns what

the company is doing to remain relevant in the market and to retain or attract new clients.

That proves that generating competitive advantage is also part of strategizing. Tanwar (2013)

discussed Michael Porter’s, a renowned researcher, generic competitive strategies which he

suggests comprise mainly two concepts; cost leadership and differentiation. A company’s

generic strategy depends on its choice of competitive advantage and scope (Tanwar, 2013).

While competitive advantage relates to cost leadership vs. differentiation, scope concerns

whether a company focuses on broad or narrow industry segments (Tanwar, 2013). One

could argue that Hong Kong Airlines uses the cost leadership generic strategy because it tries

to lower costs of services to attract both the rich and budget-sensitive clients. For example, a

few months backs, the company made efforts to favor business travelers from both small and

medium-sized companies (Freed, 2017). It did so by launching new routes to North America

and Europe (Freed, 2017). It was a way of challenging Cathay Pacific Airways, Hong Kong’s

dominant airline (Freed, 2017). The ideology behind going ahead with this competition

ASSESSMENT TWO – INDIVIDUAL REPORT 6

strategy was that clients did not have to be of rich backgrounds to use the company’s

services. There are more examples which show that Hong Kong is pursuing the cost

leadership strategy to gain competitive advantage. On the other hand, the company has not

fully exploited the differentiation strategy of competition because, for example, its frequent

flyer program does not match that of its competitors. Cathay Pacific Airways has a much

better one than it. It uses HNA Group’s, a Chinese conglomerate headquartered in Haikou,

flyer program which is inferior compared to loyalty programs used by competitors (Sumers,

2017). Again, they too are also using the cost leadership strategy. Few aspects imply that the

company’s management is in pursuit of using the strategy such as promoting luxurious,

affordable travels by offering free food and drinks, and developing long-haul routes such as

the ones leading to North America which no competitors have considered (Sumers, 2017).

Differentiation is not a matter of lowering costs in this case because other airlines are also

trying to create low-cost air rides to attract clients. It concerns more about the extra value

clients get when they pay for the company’s services other than the travel itself such as even

security, not only food and drinks. There are also other theoretical frameworks such as the

Bowman’s Strategy Clock which also serve as useful ways for understanding the strategic

positioning of a company. Evidently, the main competition strategies that Hong Kong

Airlines seems to be pursuing is expanding to where its competitors have not yet evolved to,

lowering flight costs, and even giving more value to clients through, for example, free food

and drinks.

Resource-Based View

This part of the paper will review Hong Kong Airlines’ strategic resources and core

competencies that enhance its competitive advantage in the market. According to Kabue and

Kilika (2016), a company’s resources are the only thing that promote sustainable competitive

advantage. The two claim that company resources need to be valuable, rare, inimitable and

ASSESSMENT TWO – INDIVIDUAL REPORT 7

immobile (Kabue and Kilika, 2016). Industries with common and mobile resources need to

build core competencies which their competitors cannot imitate (Kabue and Kilika, 2016).

Therefore, a resource-based view explains how an organization achieves a competitive edge

using the resources available to it. It makes it correct to say that resources are a firm’s

strengths. Examples of organizational resources a firm could have are its assets, financial

capabilities, organizational processes, and more (Kabue and Kilika, 2016). Hong Kong

Airlines’ main strategic resource must be its large and continuously expanding route network.

It has the fifth largest network in China (CAPA, 2017). It serves mainly, China, Japan,

Taiwan, Thailand and Indonesia (CAPA, 2017). Most of its yields come from routes

connecting Hong Kong and mainland China (CAPA, 2017). The efficient network must be

what makes it capable of attaining a significant market share and remaining competitive in

the market. Having a large network expands the company’s customer base. Hong Kong

Airlines is managing to expand its networks probably due to the vital partnerships it has with

other corporations. That must be one of the ways the company gets capital for expansion. It

means that partnerships is also another of the firm’s strategic resources. For example, the

airline is a sister to Hong Kong Express, one of the low-cost carriers in Asia (CAPA, 2013).

Their partnership is what enabled the firm to accommodate both premium and business class

services. That must be one of its main strategic resource for tapping both high-end and

budget-conscious users. Being able to attract different kinds of users increases the company’s

market share. According to Lee (2017), the company is, in fact, seeking new opportunities

through fleet expansion, code-sharing, and interlining arrangements. For example, it was

seeking partnership with the Belt and Road Initiative launched by China’s president in 2013

to exploit the opportunity of developing routes to more countries (Lee, 2017). Another of the

firm’s strategic resources is it workforce. The company won the Employer of Choice Award

back in 2015 (eTN, 2016). Also, from 2013 to 2016, statistics reveal that the company has

ASSESSMENT TWO – INDIVIDUAL REPORT 8

increased its employee numbers by 30% (eTN, 2016). Not only has the company managed to

train and add its employees to offer best services to clients, it also provides them with the

most suitable working environment (eTN, 2016). The public considers such a gesture ethical,

and that most likely contributes to getting new clients. All of Hong Kong Airlines' strategic

resources are helping the company build a stronger brand image which is usually also a

resource for sustaining competitive advantage. Its reputation especially concerning its

workforce must be its core competence since streamlining its labor even got the company an

award. Analyzing the airline’s strategic resources reveals that the company upholds Porter’s

proposed value addition activities. They constitute both primary and support activities

(Antoniou, Levitt, and Schreihans, n.d.). Primary activities include operations, service,

marketing, sales and logistics while the supporting activities include infrastructure, human

resource, technological development and procurement (Antoniou, Levitt, and Schreihans,

n.d.). Up to this point, it is evident that Hong Kong Airlines conducts primary activities such

as transforming operations and services to suit clients and supporting activities such as

enhancing human resources. All these factors help the company gain a competitive advantage

in the market.

Current Strategic Directions and Development Methods

According to Evans (2015), strategy is always a process. Given that Hong Kong

Airlines belongs to the tourism, hospitality and events industry, it needs to keep updating its

business strategy to remain relevant in this dynamic market. Travelers are not usually only

business men and women, but also, families or individual people going on vacations.

Consistent strategic thinking is necessary to ensure a company’s long-term success (Evans,

2015). This part of the paper aims to discuss Hong Kong Airlines’ current strategic direction

and the methods it is using to develop the company more. It will use the Ansoff Matrix, also

known as the product/market expansion grid, to determine what Hong Kong Airlines is doing

ASSESSMENT TWO – INDIVIDUAL REPORT 9

to increase profits, clients and the risks involved. The Ansoff’s Matrix model constitutes four

elements that managers can use to analyse a company’s strategic direction; market

penetration, market development, product development and diversification (Hussain et al.,

2013). Market penetration is the action of increasing production of a product and supplying it

to the same market (Hussain et al., 2013). Usually, the aim is to tap new clients in the same

target market (Hussain et al., 2013). For Hong Kong Airlines, the target market must be

international and national citizens. The company is exploiting the market penetration method

because recently it has launched more travel routes. Los Angeles to Hong Kong is one of the

most recent, launched on 18th December, last year (Rosen, 2017). The organization is even

buying and leasing new and advanced airbuses such as the A350-900 (Rosen, 2017). It means

the company is doing everything possible to attain large numbers of loyal clients from all

over the world who have to use, or prefer, air transport. Also, one could say the company is

making efforts to penetrate the market because it takes into consideration that clients could

either be wealthy or budget sensitive and gives both categories individual offers. Market

development, on the other hand, is penetrating new markets to sell existing products (Navarra

and Scaini, 2016). Visualizing matters similar to how the company upholds market

penetration shows how the organization promotes market development. By forming new

routes; one could say that Hong Kong Airlines is simply expanding its flight services to new

markets. Furthermore, it is solely in the carriage business. The new markets which the firm is

entering are those from other locations where the company had not been before such as, the

previously mentioned, London or North America. Market development involves adopting

new networks, changing the price strategy and forming a new promotional mix while market

penetration involves determining a competitive pricing strategy, new promotional methods

and increasing expenditure for advertising (Smith, 2017). The similarity between the two

strategic directions is that they mainly rely on new marketing strategies to make a company

ASSESSMENT TWO – INDIVIDUAL REPORT 10

successful. Nevertheless, the main difference between the two strategic directions is that

market penetration possesses lower risk than market development (Smith, 2017). Hong Kong

Airlines’ experience proves this because, for example, it has to abandon its unsuccessful

long-haul routes such as the one from Hong Kong to Gatwick (Gill, 2013). That means

businesses should be extra careful when determining new markets to minimize chances of

major hitches but still anticipate that problems may occur upon entering them. Product

development means innovating new products or services to sell in the existing market. This

strategic direction needs a company to cater for research and development (R&D), assess

customers’ needs, and create a path for brand extension (Ansoff Matrix, n.d.). As for Hong

Kong Airlines, it is not logical to say that the company comes up with new products or

services; its central business is to provide air transport. All the company does is offer

lucrative deals to travelers by adjusting prices. Lastly, adopting a diversification strategy as a

strategic direction means creating new products or services for new markets. It is riskier than

product development because, in this case, the organization usually does not have any

experience with the new market (Ansoff Matrix, n.d.). It is arguable that Hong Kong Airlines

follows this strategic direction because it comes up with new routes to new locations.

The company is also pursuing many development methods such as expanding its

network through establishing new routes, providing customers with favorable flyer programs,

buying more advanced aircrafts and even partnering with other corporations. Another of the

latest routes the airline launched which this essay has not mentioned is Hong Kong to San

Francisco (HONGKONG AIRLINES, 2017a). It was part of expanding the organization’s

presence in North America (HONGKONG AIRLINES, 2017a). During this launch, the

airline even pledged to develop another route to New York (HONGKONG AIRLINES,

2017a). The company was to use its new Airbus A350, famous for being fuel efficient and

capable of carrying over three hundred passengers, for the Hong Kong to San Francisco route

ASSESSMENT TWO – INDIVIDUAL REPORT 11

(HONGKONG AIRLINES, 2017a). The company is also trying to upgrade its services

because, for example, it has pledged that as from 16th of this month, it will operate a three-

time weekly service to the Maldives, a series of beautiful islands in the Indian Ocean

(HONGKONG AIRLINES, 2017b). Flexible flyer programs tend to attract more customers

whether in the firm’s new or existing markets. Towards the end of last year, the company

signed a codeshare agreement with Fiji Airways (HONGKONG AIRLINES, 2017c). That

enabled the company to merge with Fiji Airways in enhancing connectivity for customers

between about six crucial destinations within Asia and the South Pacific (HONGKONG

AIRLINES, 2017c). That rationalizes the fact that, indeed, joint ventures like code sharing

promote organizational development. Hong Kong Airlines even, a few months back,

purchased 51% shares of an investment company called SATS HK Limited (HONGKONG

AIRLINES, 2017d). It did that to enhance the overall service quality and to keep

strengthening its brand. All these development measures the company is pursuing increase its

net-worth and size to perhaps, one day, match that of its competitors in Hong Kong such as

Cathay Pacific Airways. Hong Kong Airlines is growing itself through many strategies other

than the mentioned ones.

Recommended Growth Directions and Development Methods

Assessment two proposed that the company should ensure it gets well covered against

damages which could stem from, for example, harsh weather conditions, it should also try to

expand to other major cities to increase its client base, and it should utilize customer

responses to see how it can improve its services. In addition to that, the company should also

try increasing marketing and work on evading scandals. For especially its new routes or

services, the company’s management should factor in that marketing is the only key to

reaching the most clients possible. Hong Kong Airline should ensure to utilize the new and

upcoming modes of effective marketing such as social media. Companies, not only within the

ASSESSMENT TWO – INDIVIDUAL REPORT 12

tourism sector, are finding this to be the best method of enhancing brand awareness because

of the many online users in the world today. As Kolb (2017) claims in his book, marketing,

again, always has to be an honest relationship between a seller and buyer. Managers should

understand that each is after getting what they want (Kolb, 2017). It is commendable how the

company is putting an effort to offer more luxury to travelers such as with the free food and

drinks idea. That enhances customer satisfaction and makes clients loyal to the brand.

Managers of Hong Kong Airlines should realize that the company is now internationally-

acclaimed. The company should ensure that it interacts with locals in the regions (for

example, cities) where it bases its operations. Tourists always anticipate a new taste of culture

in the areas they travel to; therefore, it is essential for the organization still to display that

local culture in the various networks. In fact, that local culture is usually the best for

promoting businesses in different locations. The company should also try to ensure that it

evades harmful publications. Scandals only ruin the company’s reputation. Even if at times

there may be unanticipated issues which could cause hitches such as flight delays, the

company should learn how to keep the clients calm. It could be by, for example, making them

aware of the reason of the delay, that it was unanticipated, and the management is doing

everything possible to amend the problem. If customers’ responses are negative because the

airline has too many flight delay issues; it means that management has to come in and discuss

the necessary adjustments. It is also commendable that Hong Kong Airlines is partnering with

other companies; it gives it the advantage of shared risk and enables it to expand its network.

Managers of the company should have a solid understanding of the company’s strategic

directions. For example, when the company is diversifying, there higher risks, the company

should ensure it has enough resources to carry out the mission suppose there are even hitches

and enough information about the possible dangers to devise ways of maneuvering them.

Best marketing strategies such as using social media are best for market penetration and

ASSESSMENT TWO – INDIVIDUAL REPORT 13

development. Both strategic directions need the company to have a concrete understanding of

the types of customers within the target market. It is commendable how the organization is

taking into consideration that there are wealthy as well as budget-sensitive clients.

Conclusions

Just as Assessment One showed that Hong Kong Airlines has both strengths and

weaknesses, this assessment proved that there are strategic adjustments the company should

consider making to improve profitability and growth. Hong Kong Airlines is in a relatively

good strategic and competitive position because it is continuously expanding its operations.

For example, it has launched new routes to significant regions of the world such as Los

Angeles and San Francisco. By starting new routes, it means the company is pursuing the

market development strategic direction which has a medium risk. The business can only

thrive in these new markets through thorough marketing and integration with the locals. It is

wise that the company is also exploiting the market penetration strategic approach because it

has the lowest risk. For this case, the company only needs to capitalize on its marketing

skills. It is commendable that the company is exploiting other promotion ideas such as giving

customers more value for their money and comfort during travels. For example, as an effort

to provide luxurious and affordable services, the company considered offering free food and

drinks. Hong Kong Airlines also acknowledges the type of clients in the market; it is right

that the company considers persons of all class. Like other organizations, the company is also

exploiting the cost leadership strategy for competition. There are weak indications that the

company is utilizing differentiation. This paper recommended that the company should

consider using current marketing strategies such as social media which are proving to be

useful in this modern age.

ASSESSMENT TWO – INDIVIDUAL REPORT 14

References

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ansoff-matrix.pdf

Antoniou, P. H., Levitt, C. E. and Schreihans, C. (n.d.). Managing Value Chain Strategy.

Journal of Management and Marketing Research, 1-11.

CAPA. (2017). Hong Kong Airlines, Asia’s fastest growing carrier,looks to become

reckoning force in the region. Retrieved from:

https://centreforaviation.com/insights/analysis/hong-kong-airlines-asias-fastest-

growing-carrier-looks-to-become-reckoning-force-in-the-region-86233

eTN. (2016). Hong Kong Airlines is ‘The Best Place to Work in Hong Kong’ in 2016.

Retrieved from: https://www.eturbonews.com/140369/hong-kong-airlines-best-place-

work-hong-kong-2016

Evans, N. (2015). Strategic Management for Tourism, Hospitality and Events.U.S.:

Routledge.

Freed, J. (2017). Hong Kong Airlines Targets Cathay Pacific’s Core Business Market.

Retrieved from: https://www.reuters.com/article/us-hk-airlines-strategy/hong-kong-

airlines-targets-cathay-pacifics-core-business-market-idUSKCN1BH1M4

Gill, R. (2013). Heathrow attacks Gatwick over ‘long-haul failure.’ Retrieved from:

http://buyingbusinesstravel.com/news/2721430-heathrow-attacks-gatwick-over-

%E2%80%98long-haul-failure%E2%80%99

HONGKONG AIRLINES. (2017a). Hong Kong Airlines to Launch Directly to San

Francisco. Retrieved from:

http://www.hongkongairlines.com/en_HK/media/detail?id=10005545356_269

ASSESSMENT TWO – INDIVIDUAL REPORT 15

HONGKONG AIRLINES. (2017b). Hong Kong Airlines to fly to the Maldives, providing

customers with more choices that ever. Retrieved from:

http://www.hongkongairlines.com/en_HK/media/detail?id=10005547252_269

HONGKONG AIRLINES, (2017c). Hong Kong Airlines Signs Codeshare Agreement with

Fiji Airways. Retrieved from:

http://www.hongkongairlines.com/en_HK/media/detail?id=10005532832_269

HONGKONG AIRLINES, (2017d). Hong Kong Airlines Completes the Acquisition of 51%

shares of SATS HK Limited. Retrieved from:

http://www.hongkongairlines.com/en_HK/media/detail?id=10005532747_269

Hussain, S., Khattak, J., Rizwan, A., and Latif, M. N. (2013). ANSOFF Matrix, Environment,

and Growth – An Interactive Triangle. Management and Administrative Sciences

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Kabue, L. W., and Kilika, J. M. (2016). Firm Resources, Core Competences and Sustainable

Competitive Advantage: An Integrative Theoretical Framework. Journal of

Management and Strategy, 7(1), 98-108.

Kolb, B. (2017). Tourism Marketing for Cities and Towns: Using Social Media and Branding

to Attract Tourists. U.S.: Taylor & Francis.

Lee, D. (2017). Hong Kong Airlines seeks Belt and Road partners amid plans for expansion.

Retrieved from: http://www.scmp.com/news/hong-

kong/economy/article/2118199/hong-kong-airlines-seeks-belt-and-road-partners-

amid-plans

Madu, B. C. (n.d.). Vision: The Relationship between a firm’s strategy and business model.

Journal of Behavioral Studies in Business, 1-9.

ASSESSMENT TWO – INDIVIDUAL REPORT 16

Navarra, D., and Scaini, L. (2017), Improvements In the Strategic Use of the Marketing

Matrices Applying Dynamics Parameters Based On Time: A Better Analysis of

Prospect. European Scientific Journal, 12(10), 1-20.

Rosen, E. (2017). Fly From Los Angeles To Hong Kong On Hong Kong Airlines Starting

Today. Retrieved from: https://www.forbes.com/sites/ericrosen/2017/12/18/fly-from-

los-angeles-to-hong-kong-on-hong-kong-airlines-starting-today/#2541279226ac

Smith, A. (2017). Business Management for the IB Diploma Exam Preparation Guide.

Cambridge: Cambridge University Press.

Sumers, B. (2017). Hong Kong Airlines Wants to Disrupt Cathay pacific on Trans-Pacific

Routes. Retrieved from: https://skift.com/2017/09/25/hong-kong-airlines-wants-to-

disrupt-cathay-pacific-on-trans-pacific-routes/

Tanwar, R. (2013). Porter’s Generic Competitive Strategies. Journal of Business and

Management, 15(1), 11-17.

Appendices

ASSESSMENT TWO – INDIVIDUAL REPORT 17

SWOT – stand from strengths, weaknesses, opportunities, and threats. They are factors which

enable to strategically assess a company.

PESTLE –Stands for political, economic, social, technological, legal and environmental

factors. The framework helps determine the external market factors that influence a business.

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